Saturday, September 22, 2007

MG's current 'cheap' stocks

The following is a short list of a few stocks that I believe are currently trading significantly underneath their fair value according to my models that I use to evaluate stocks on my watchlist, which is composed of about 40 stocks. I will list the stock (with ticker), the price under which I believe the stock to be cheap, some details about why the stock might be trading at this low level, as well as other details about the company that I feel are relevant.

Remember to do your own research before purchasing any investment.

Reitmans Canada (RET.A) - Under $21.
- Reported weak results last quarter and announced a restructuring of it's struggling Cassis banner ( a clothing store catered toward baby boomers).
- August same store sales were down about 6%, the CEO blamed the credit crunch's impact on shoppers confidence....which seems a little silly to me...
- Apparently the high $CAD should help them as they purchase their materials in $USD and earn $CAD.
- Yields 3.2%, and has been an aggressive raiser of dividends, however shareholders have not seen a raise in quite some time....
- P/E = 14.7

Citigroup (C) - Under $50
- U.S. banks have been under pressure because of the subprime crisis, however they seem to be recovering as of late and should do better as interest rates dive.
- In the short term earnings could be hurt by the crisis.
- Citigroup is generally regarded as a very good quality, global bank, which is well diversified.
- Yields 4.6%, great dividend raiser, the dividend has been almost tripled since Jan. 2003.
- P/E = 10.9

Bank of America (BAC) - Under $51
- See Citigroup...
- Yields 5.0%...
- P/E = 10.7

The Home Depot (HD) - Under $36
- Easy to see why this one is cheap given the U.S. housing crisis.
- Regardless of your opinions on their customer service in the stores, every way you look at the fundamentals of this company will show you their strength. I once called Walgreen 'Home Depot without the hammers.'
- I have a feeling that when we all look back at the time period of 2006 - 2008 we could see it as a good time to have purchased shares in HD (that is assuming housing activity levels off and picks up soon).
- All this being said this industry is scary right now, "buy when everyone else is selling?"
- Yields 2.6%, another very good grower of dividends as they have quadrupled their dividend since 2003. They are also buying back their own shares at a phenomenal rate as I've posted about previously.
- P/E = 13.6

more to come....

8 comments:

Nurse B, 911 said...

Just looking at the P/E's and Yields of C & BAC make me say "WOW". I'm beginning to develop a new strategy for my RSP account based on some of these cheap stocks and the current valuation of our CDN$.

Torbjorn said...

hey, just wondering if your purchase of IPL.UN ever went through as I don't think it dropped to $8.30 after you put in a stop order. Still waiting?

Also, I like the prospects of WTE.UN, Westshore Terminals - though now with dollar parity coming and going it'll help to do some reading and research on which way exports will go, or if this stock will benefit from higher prices.

MG said...

torbjorn,

The limit order is for $8.80 and it has not gone through as of yet. Might not at all...

I am not familiar with Westshore

Thicken My Wallet said...

Great list. I would also list the price to book for banks since that is a good indication of value for the financial industry. BAC's p/b is becoming very attractive.

MG said...

Good point thicken.

BAC and C both have P/B of less than 2.0.

Mr. Cheap said...

I keep coming across Reitmans, so it might be worth having a look at... it definitely should definitely have a low correlation with the rest of my portfolio.

Anonymous said...

I would add WMT on the list as well. Buying below 43.00

My 2 cents: BAC would be a better buy than C

MG said...

I don't follow WMT so I can not comment.

Reitmans is certainly looking interesting right now...